Yesterday, the U.S.debt broke the $13 trillion level. Considering that the U.S. GDP or the U.S. economy is $14.2 trillion (according to the World Bank), that makes our debt level just over 91% of the GDP. Greece’s debt-to-GDP ratio is currently at 115% (or 133% depending on who you ask – I don’t think even the Greeks know for sure!) and look at the trouble it’s facing!
Professor Morici, of the University of Maryland, is critical of excessive government spending. He claims that whenever the debt-to-GDP ratio exceeds 150%, you run the risk of hyperinflation or “the Chinese buying up Wall Street”, a reference to China being the largest foreign lender to the U.S. government. Either way, he claims that we will run the risk of losing our financial standing.
On a brighter note, the UK is trailing right behind us with a debt-to-GDP ratio of 78%. But the real leader of pack is Japan, with a whopping 227%! Not to worry, we’re nowhere close to Japanese levels yet!
After WWII, our debt stood at 125% of our GDP and we were able to bring it under control. Let’s hope we can do the same thing once again. Meanwhile, we can all watch our share of the federal debt over at the U.S. debt clock and how the national debt seems to be growing $50,000 every second!
With the passing of the Health Care Bill, there is a slew of tax increases that will go towards paying for it. I don’t think any of them are going towards paying down our ballooning debt. Congress probably feels that inflating it away is the easiest solution! And it is, provided the inflation comes in an orderly fashion. But what if it doesn’t?
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